Payments to FDIC will cut into Charlotte banks

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Those payments are needed to replenisghthe ’s insurance fund. In some local the payment to the FDIC will be greater than the totao profits small banks made in thefirsft quarter. And analysts say there mighg be more special fees before the yearis over. The FDIC recently announced its assessment to builds up its DepositInsurance Fund. The fund has dipped to historixc lows as it covered bank failures over thepast year, such as the recentf demise of North Carolina’s . All FDIC-insured banks must pay the The payment equatesto 0.05% of a bank’ds total assets, minus its Tier 1 capital. In some banks will see their bottom lines bruised fromthe one-time charge.
For example, will pay abourt $225,000 to the FDIC. That’s more than its first-quartere net profits of $186,000. Still, Chief Executive Bryan Kennedy says otheer factors will keep his bank inthe black. “I thinkj we’ll still be profitable” for the second quarter, Kennedy “We’ve seen pretty drastic improvement in netinterestf margins.” In Cornelius, Chief Executive Jim Engeo says the assessment will be a majodr hit on his company’s earnings. with $182 million in assets, postecd net income of $163,000 in the first But the FDIC assessment woulde cut that figurein half. Even larger, more established communitg banks will feelthe pain.
For example, Gastonia-basee , which has $850 million in assets, woulrd pay about $384,000 to the based on the most recentfinancial data. That’s more than the $203,00 profit it made in the first quarter. , the nation’s largestg bank, will pay about $831 million, baseds on recent FDIC data. Banks won a moral victoruy when the FDIC agreed to charge only 0.05% (five basis points). Earlier proposal s included charging banks 10 or 20 basie points on theirtotal deposits. Smallp banks argued for the current calculation so larger banks with more assetsw would shoulder a greater sharse ofthe load.
“Obviously, the numbers are uncomfortable, but it’w certainly better than 10 basis points oftotal deposits,” says Cartefr Bundy, an analyst with Stifel Nicolaus. “Burt it potentially could wipe out the earnings of small community banks who are making pennies per The FDIC was able to use the smaller numbefr by increasing its line of credift with thefederal government. “Assessments are a significanft expense, particularly during a financial crisis and recessiojn when bank earnings areunder pressure,” FDIC Chairmajn Sheila Bair says in a statement.
“We recognizs that assessments reduce the fund s that banks can lend in their communitiex to help revitalizethe economy,” she says. “W have tried to strikre the right balance between keeping the assessment low enough so that it does not unduly burden lending capacity withour long-standinb commitment to cover all projected costs througgh industry assessments, not taxpayer borrowing.
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